Learn more about moneyandinvestments with this collection
How to make rational decisions
The role of biases in decision-making
The impact of social norms on decision-making
An example of irrational behaviour:
Offer someone a choice of
Chances are people will choose the sure $50.
But offer a choice of
and the person will probably pick the last option.
In reality, the chance of the coin landing on one side or the other is equivalent in any scenario. But people view the possibility of regaining a loss as more important than a greater gain.
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MORE IDEAS ON THIS
Behavioural finance is a subfield of behavioural economics. It argues that when people make financial decisions like investing, they are not nearly as rational as traditional finance theory predicts.
Mainstream theory make assumptions in its models that people are rational and free from emo...
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Behavioural finance can give us insight into how financial decisions are influenced by emotion around things like investments, payments, risk, and personal debt.
Understanding how people can deviate from rational expectations can help us make better and more rational decisions.
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The herd instinct. People tend to imitate others. Investors may fear that others know more or have more information and will tend to do what others are doing.
Behaviour finance has also found that investors tend to rely on judgments derived from small samples of data or sin...
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Other curated ideas on this topic:
You have probably came across situations where you said you should "flip a coin" or "roll the dice" in order to move forward.
This is a method of giving up conscious control for something "unpredictable."
Imagine that you had your eyes so sharp that you could guess w...
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